A pair of reports on the California housing bubble. "Southern California's housing boom is running out of steam, but the slowing pace of sales won't erode the huge gains in equity that many homeowners have realized in recent years, says a report by Harvard University."

"Not all economists share the report's optimism. In recent months, some analysts have warned that price drops are possible as inventories of for-sale homes grow in Southern California. Economist Mark Schniepp of the California Economic Forecast said yesterday that those who embrace the 'soft landing' scenario may be engaging in wishful thinking."

"'It has become a popular notion simply because people really want it to happen,' Schniepp said. 'We know that happy endings don't always happen. We may be in the midst of a hard landing. . . . Interest rates are rising, and relatively sharply since March.'"

"Economist Zoltan Pozsar holds that the lack of affordable housing and the broad use of adjustable-rate mortgages make California's pricey housing markets vulnerable to corrections. California 'is at the highest risk of seeing downward pressure in home prices,' Pozsar said. 'You are more exposed because housing is most unaffordable in California of all states. Home prices have been in a much sharper run-up than elsewhere, but median incomes have not kept pace.'"

"In April, San Diego County's housing prices slipped in some areas. The overall median sales price was $505,000, down from the peak of $518,000 in November. The year-over-year increase was 4.3 percent from a year ago. Overall sales were down nearly 31 percent from April 2005 to 3,705 transactions."

"Harvard's housing center attributed continued price gains around the country to the lending industry's development of adjustable loans that enable people to buy costlier homes. The report was optimistic about the ability of home buyers to handle adjustable loans. For most homeowners, increased mortgage payments are still several years off. Homeowners generally have 'sizable equity stakes to protect them from selling at a loss, even if they find themselves unable to make their mortgage payments,' the report said."

The Valley Voice. "The Tulare County Association of Realtors reports as of June 1 the inventory of existing homes for sale reached 1690, up from 1541 in early May of 2006. These numbers compare to just under 400 homes for sale this time last year."

"A second more detailed report done by Icenhower Real Estate of Visalia focuses on both new home builders in the Visalia area as well as the market conditions for existing homes. 'We needed to get a handle on what was going on,' says Brian Icenhower who worked on the report."

"'We found there is an excess of 70 subdivisions being marketed in the Visalia area alone,' says Icenhower and the competition in new homes and volume of product 'has driven down prices for both new houses and existing homes.'"

"The pace of building has not let up in Visalia, the city reports, with an expected 1400 to 1550 new homes likely to built this year."

"The Icenhower report details that of the 845 existing homes for sale in Visalia, 283 or one third of them are vacant. Icenhower says that’s due largely to the fact so many homes in recent years were purchased by investors."

"The report details what new home builders are marketing in their Visalia subdivisions with most now offering a 3% commission (some go to 4% commission) as well as incentives that range from $2,000 to $20,000."

"MLS figures for June show pending sales are about 50% of what they were last June signaling slower sales even as the home selection grows for both new and existing homes."

"Icenhower says the 'the numbers kind of shocked me' especially when you add in the amount of residential land and lots already available in the city."